Billionaire investor Ray Dalio warns that artificial intelligence (AI) is in a "classic bubble" that is approaching the point where it could pop, as interest rates rise and investors will need to convert part of their wealth into cash. Speaking on Wednesday, October 7, 2026, at the Forbes Global CEO Conference in Singapore, the founder of Bridgewater Associates argued that massive amounts of debt are being funneled to fund AI investments, increasing risks for the markets.
"We are approaching the point where the bubble will burst"
Ray Dalio estimated that the market has not yet reached the tipping point, but it is very close. "We are in the part of the cycle that precedes that point, but we are approaching it," he stated characteristicly. "I think we are close." According to Dalio, rising interest rates combined with the need to raise liquidity could serve as the catalyst that triggers the market crash.
Hundreds of billions of dollars in AI – increasingly funded through debt
Dalio's warnings come at a time when tech giants are spending hundreds of billions of dollars to advance artificial intelligence. An increasingly large portion of these investments is being funded through borrowing, while global government bond yields record significant increases. Bond yields have risen to their highest levels in decades, driving up the financing costs of the massive investments required to build AI infrastructure. This creates a particularly dangerous environment for companies aggressively investing in tech, as the cost of money rises while capital needs remain huge.
Markets continue to hit records
Despite the warnings, equity valuations continue to trend upward. Optimism surrounding corporate profits has pushed the S&P 500 and Nasdaq 100 to new historic highs this week. This picture reinforces concerns over a market where gains are increasingly concentrated in a limited number of tech stocks. For Dalio, the growing concentration of capital in tech and surging capital expenditures create conditions reminiscent of previous periods of intense stock market bubble excesses.
Wealth taxes could accelerate the reversal
Ray Dalio, who has long warned about the risk of an AI bubble forming, believes that it is not only interest rates and debt that can cause a collapse. Another factor is wealth taxes and, more broadly, policies that force investors to convert unrealized gains into actual cash. As he explained, the massive fortunes generated through rising markets cannot be directly used for consumption or other needs without first liquidating part of the holdings. "Everybody says 'I'm worth $1 billion,' but okay, try to spend it," Dalio noted. "To spend it, you have to sell wealth to get cash – and that is usually where the bubble starts to get punctured," he added.
The big gamble for AI
Dalio's warning comes at a critical juncture for the artificial intelligence industry. The world's largest tech companies are continuously ramping up investments in data centers, computing power, and infrastructure, with total costs running into hundreds of billions of dollars. At the same time, higher bond yields raise borrowing costs while stock valuations remain at historic highs. For Dalio, the question is not whether an AI bubble exists, but how close the market is to the point where increased financing needs, more expensive capital, and the need to liquidate assets could reverse the current market euphoria.
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